Scout Media, an operator of a network of college sports websites, is scrambling in the face of creditor pressure.
The company on Thursday was hit with an involuntary Chapter 11 petition in the U.S. Bankruptcy Court for the Southern District of New York in Manhattan. No motions have been filed in the case, which is assigned to Judge Michael E. Wiles.
Alleged debtors have 21 days from a summons -- until Dec. 23 for Scout -- to respond to involuntary petitions. Failure to respond would result in entry of an order for relief, making the bankruptcy official.
"We have no comment at this time other than to say Scout's best-in-class network of publishers will continue to provide the premium content and dynamic communities that our millions of users know and love," Scout Media President Craig Amazeen said via email.
Leading the charge of petitioning creditors is print services company LSC Communications(LKSD) - Get Report , which holds a $671,651 claim on a judgment in its favor after it sued Scout in New York State Supreme Court.
LSC sued Scout in November 2015 after the company allegedly failed to pay $712,000 it owed on a catalog printing contract. The two sides settled in April for $667,001, but the agreement fell through after Scout Media allegedly defaulted on an agreed-upon $34,555 monthly payment. Judge Ellen M. Coin entered a judgment in favor of LSC on Oct. 26.
Joy R. Grafton of Popper & Grafton, counsel for the petitioning creditors, was not immediately available for comment. Popper & Grafton also represented LSC in the state court proceeding.
Seattle staffing agency iMatch Services (owed $81,613) and catering company On Safari Foods ($29,116) are the other petitioning creditors.
Founded in 2001 by Jim Heckman, Scout, which has offices in New York and Seattle, operates a network of websites devoted to college football and college basketball. It devotes extensive coverage to the hotly contested battles for elite high school recruits, and its recruit rankings in both sports carry a lot of weight in the industry.
News Corp.'s (NWSA) - Get Report Fox Sports bought the website network in 2005 for an estimated $60 million before selling it off to Pilot Group-backed North American Membership Group in 2013 for an undisclosed price. NAMG, led by CEO Heckman, eventually rebranded itself as Scout Media.
In July, Heckman was fired for allegedly using company funds to bankroll personal expenses. Heckman -- who also founded recruiting site Rivals.com, sold to Yahoo! (YHOO) in July 2007 for a reported $100 million -- called the allegations "pure fraud" in a mass email sent to the publishers of Scout's websites and obtained by sports media blog AwfulAnnouncing.com.
Awful Announcing also obtained an email purportedly from the website's product and engineering staff that claimed the team resigned en masse over a takeover of the company by Russian investors and Heckman's ouster. The email said that employees were receiving paychecks late, the claims against Heckman were false and that the engineering team had been locked out of the company's Seattle office after asking the board of directors to be paid on time.
Amazeen did not immediately reply to a request for comment on the reported July actions. Heckman also could not immediately be reached.
Heckman has since reemerged as the CEO of a new digital media network, theMaven Network, which is scheduled to launch in the first quarter of 2017. He will be joined by Scout's former chief technology officer, COO and 12 of its former digital engineers, as well as former chairman Ross Levinsohn, who also served as interim CEO for Yahoo! in 2012.
The company went public through a reverse merger with shell company Integrated Surgical Systems. Following the close of the deal on Nov. 4, ISS changed its ticker on the OTC Pink tier of OTC Markets to MVEN.
"Given the direction things ended up going, we're all just so happy to be moving on with our lives and honored we were able to preserve the entire core team," Heckman told the New York Post back in July. "We're going to build something incredible together, free of the Russians, debt, the acrimony and ineptitude -- it's such a relief."
This article was originally published by The Deal, a sister publication of TheStreet that offers sophisticated insight and analysis on all types of deals, from inception to integration. Click here for a free trial.